Income Protection or Mortgage Payment Protection

mwilde

What's best please? Income protection or Mortgage Payment Protection?

I want insurance just for my wife, in case of redundancy. I don't want it for myself as i work in a industry that isn't effected by the credit crunch (touch wood - Registered Social Housing).

I've had advise from 2 different life insurance providers, both are trying to sell me life insurance with income protection for my wife - she gets around £800 gross each month - so they say i can only have £400 income protection ie 50%.

I dont really want to touch my life insurance, as im happy with it, and it was only setup in 2007.

Reading Martins excellent website, i have seen a link for IProtect Mortgage Protection Insurance (MPPI). This says that i can get up to 75% of her wage - meaning i can have £600 cover, for a lot less than the income protection - yes its only for 12 months - but thats fine for us.

The other concern is, because we are joint names on the mortgage - if im not made redundant, will this effect them paying our joint mortgage, if she is made redundant?

Im asking on her becuase i think that they are trying to sell me life insurance to make more money from me - they are also trying to sell me critical illness insurance.

Am i safe to just signup online for it myself?

Matthew
Thank you

protectionadviser

Hi mwilde,

If you are content with the fact that the MPPI would pay out potentially for a maximum of 12 months then that would suggest mortgage protection insurance may be suited more to you/your wife's needs than income protection which incidentally for redundancy may only cover for the same period (longer for accident/sickness). Some MPPI policies will also payout for up to 24 months if this makes you feel more comfortable on the redundancy side.

If the cover is in her name and she is made redundant the cover will normally pay out whatever amount is covered on a monthly basis.

If you only want the cover for your wife, then I would be firm and say you do not require any additional insurance for yourself especially as you have only fairly recently taken some out and are happy with it.

Thanks.

OshayAway

protectionadviser wrote: »

If the cover is in her name and she is made redundant the cover will normally pay out whatever amount is covered on a monthly basis.

Are you sure about that 'protectionadviser'? Your alias indicates you give advice about protection policies... your post indicated your understanding is a little off, at least on this point.

dunstonh

What's best please? Income protection or Mortgage Payment Protection?

permanent health insurance (PHI) is the best (providing you dont go with a budget version which would make it similar to a payment protection version).

PPI and MPPI are not as good for accident and sickness but they do include unemployment cover. Although PHI with standalone Unemployment is a way to do it.

protectionadviser

Oshayaway, if the redundancy cover is underwritten to pay a proportion of her income if she is made redundant then it will pay out that proportion if she is made redundant. Her husband's employment status has no bearing on this if it is a single policy.

As an assessment on MPPI v PHI I would agree with dunstonh that PHI is the more superior product, but for budgetary reasons MPPI may be considered. But, obviously, the proof is in the pudding of being paid out, and at the moment, MPPI providers are getting a little bit more rigid on the basis of cover, certainly for new policies. Some PHI policies will carry out al the underwriting from the outset meaning there should be less risk of not paying out later. This is something to bear in mind when choosing between the two types. Perhaps researching into the conditions between these points may help clarify.

mwilde

Thank you for all your answers.

underwriter - are you saying that with MMPI the underwriting is done done at the beggining, meaning that if the worst did happen, they might not pay out?

Hippychick

Check about the PHI, I am currently in receipt of it and get 75% of my salary then they also deduct what I receive in IB. If your wife will only get £400.00 after IB has potentially been deducted there will be next to nothing left.

I am not sure how it works for redundancy cover.

dunstonh

PHI is underwritten at point of sale. This means they ask the medical questions before they set it up and know all about you (if you have been honest). MPPI and PPI is effectively underwritten (at consumer level) at point of claim. Its when you claim that they then check your details and decide if you can claim or not.

OshayAway

protectionadviser wrote: »

Oshayaway, if the redundancy cover is underwritten to pay a proportion of her income if she is made redundant then it will pay out that proportion if she is made redundant. Her husband's employment status has no bearing on this if it is a single policy.

In fact many insurers (admittedly not all) have a requirement that the individual insured has to be the main wage earner in order to cover the entire monthly repayment of a joint mortgage.

It's for this reason that it can be unhelpful to make such a sweeping statement as at point of claim an individual could find out that they have over insured themselves and don't have the cover they thought they did. Not to mention the waste of money. Worst case scenario the policy could be entirely invalid, in other cases it may only pay a proportion of their monthly mortgage repayment in line with income split, but some will allow it to be arranged this way. To be sure, inquire to the insurer directly and request the confirmation in writing.

Wutang_2

OshayAway wrote: »

In fact many insurers (admittedly not all) have a requirement that the individual insured has to be the main wage earner in order to cover the entire monthly repayment of a joint mortgage.

It's for this reason that it can be unhelpful to make such a sweeping statement as at point of claim an individual could find out that they have over insured themselves and don't have the cover they thought they did. Not to mention the waste of money. Worst case scenario the policy could be entirely invalid, in other cases it may only pay a proportion of their monthly mortgage repayment in line with income split, but some will allow it to be arranged this way. To be sure, inquire to the insurer directly and request the confirmation in writing.

But surely a Protection Adviser wouldn't get the basics wrong??

OshayAway

Wutang wrote: »

But surely a Protection Adviser wouldn't get the basics wrong??

That's what I thought!